Business Model Design

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Business Model Design Toolkit

Contents To find downloadable

02

Introduction

04

Overview of Templates

06

Value Proposition

08

Revenue Model Mad Lib

12

Assumptions

14

Supply Chain

16

Control Points

versions of all of the templates in this zine, go to: peerinsight.com/ bizmodelzine

@peerinsight peerinsight.com

Template 1

Template 2

Template 3

Template 4

Introduction

Business Model Design Toolkit

Imagine you just used the best user-centered design methods to validate that customers love your killer, new idea. But now what? How do you make your idea a reality? Design thinking is a problem-solving toolkit optimized for the unknown. It’s commonly used to explore user needs, but how do we apply its core principles to the business model?

What you’ll need. Going through business model testing is a lot of fun! It is also intense. We suggest a few things to make it easier.

Bypass systems and processes where you can. Ask yourself what is the scrappiest way you could stand up this experience? Then make it even scrappier (without compromising your learnings).

Be nimble. Did you learn enough to make an adjustment? Do it! Just be sure to document the evolutions along the way. Keeping these experiments small allows you to adjust in real time and maximize your learnings (instead of running a huge pilot and realizing you asked the wrong question in the first place).

Stellar Small Team Small teams mean you can be nimble and iterate quickly.

Prototyping Supplies Ways to make your ideas come to life digitally or physically.

It’s just the first dollar. Getting that first dollar is exciting. However, still ahead of us is: What’s the adoption rate? The customer acquisition cost? The churn rate? But at least you’ve validated the revenue model before you need to make those investments.

Real-Users Where can you find your target customers to do research interviews with?

Creativity Testing business models can be tough! You’ll need to find scrappy ways to get your data. 2

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Wrapping It All Up

Here’s some tips and tricks to keep in mind as you’re testing your business model. Focus on your make-or-break assumptions. You don’t need to deliver the full experience, but rather those pieces are critical to testing your most important assumptions.

Business Model Design Toolkit

You should have a lot of uncertainty and questions about your concept. And that’s okay! Here’s a handy framework you can use to help increase your confidence that an idea isn’t only addressing a need, but that there are customers out there who will pay for it too. RISK INVESTMENT CURVE

Test for a Need Test a Concept Test in the Market Test for Scale Commercialize

Move from “Say data” to “Do data.” Connecting to customers in higher-fidelity conditions allow you to measure their behavior instead of what they say they would do. Do data always beats say data.

Peer Insight uses the risk-investment curve (above) to visualize how you can de-risk opportunities quickly through in-market research. By removing layers of uncertainty through in-market experimentation, you can confirm your “say-data” with “dodata.” This will help cross the bridge from a customer’s verbal confirmation of a concept, to money actually changing hands. Do-data is behavioral data and a more reliable predictor of future behavior than say data. To collect it, you want to get in the market, put your prototype in your user’s hands, and observe and measure their behavior. The best thing is, you don’t need to run a large pilot and spend tons of money to get do data. Check out the prototyping cards on our website (see last page) for a few ways to quickly and affordably move customers from say to do.

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3

Overview of Templates

Business Model Design Toolkit

Just like in early rounds of user-centered research, you can implement those same methods with business model testing. By creating a prototype of your idea, meaning something tangible like a storyboard or webpage, customers can interact with it and give you feedback. This is a great way to understand what customers want, how much they’ll pay for it and if you can scale the idea.

The further your idea sits to the right of the grid (toward the “constrained” side) the more defensible your idea. The goal is to have some parts of your solution hidden. Meaning, there is a special sauce component that no one could really copy. Your idea is constrained by the data you collect, or the algorithms you use. When you’re first testing your business model, this is important to think about even if it’s not something you’ll activate until you’re scaling your idea.

UBIQUITOUS

Free, available to all

Commodity

CONSTRAINED

Many providers exist

Several providers exist

Possible to observe + copy

Branded + expensive to copy

Producible by only a IHZƓUPV

Protected by contractual secrecy

Protected by patent

Protected by concealment

There is a method to the madness; we suggest a fl ow to the business model templates. By following this order you’ll answer all the big questions to make sure your idea works!

4

17

5 4

Templates

Business Model Design Toolkit

User 1

Control Points

User 2

FOR Target

1

The control points grid helps you understand how defendable your idea is against competitors.

Value Proposition

Who Want Unmet Needs

We Will Offer Offering

Who is your target customer, and what do they care about?

2

That Provides Benefi ts

Uniquely Differentiation

Revenue Model Mad Lib How will customers purchase it? Through what channels?

1)

2) gnirB

3)

3

Supply Chain

yuB

dliuB

worroB

What do you need to buy or build to make this idea work?

4)

kcolB

5)

6) 4

Control Points

Free, available to all

Commodity

Many providers exist

Several providers exist

Possible to observe + copy

Branded + expensive to copy

Producible by only a IHZƓUPV

Protected by contractual secrecy

Protected by patent

Protected by concealment

1)

2)

3)

4)

5)

How will you defend your idea against competitors?

16

6)

5

1

Templates

Value Proposition This is the first step in scaling an idea, it essentially helps you understand who is the person you are wanting to serve (think target user) and what unmet need are you fulfilling of theirs (think offering)? Additionally this template highlights the benefits that’ll resonate with your target user and how you will stand out among your competitors. It’s important to note that you may have more than one target user and you’ll have to think through the differences in what each may want and need. (e.g. buyer vs beneficiary.) This template isn’t set in stone; as you learn more in your research you can continually refine your value proposition.

6

Business Model Design Toolkit

FOR Target

Who Want

Buy

Bring

Unmet Needs

Build

We Will Offer Offering

Borrow

That Provides Benefits

Uniquely Differentiation

15

3

Templates

Business Model Design Toolkit

User 1

User 2

Supply Chain Often times when people are doing business model research they think they need to build their idea out of the gate –– even before you know if customers will pay for it. The Supply Chain template helps you think through what you will buy, bring, build, borrow and block to make your business model test come to life. Instead of assuming you must build everything, this template helps you think about what you could borrow or buy to stand up the test. This template touches on the supply side of the equation; meaning how will you, as the idea creator and test maker, make your idea tangible?

Block

14

7

2

Templates

Revenue Model Mad Lib Next you’ll want to think about the way your customers are going to purchase and interact with your service/ experience. You’ll want to use the revenue model mad lib (after the value proposition) to understand who will actually be buying this service, not just benefiting from it. How frequently will customers pay for this? Is it a subscription model or onetime fee? These are all questions you can test in the market with your users. It’s great to go into testing with an opinion, or a hypothesis, and either confirm or disconfirm it through your research.

Download the word bank as cards on the website. 8

Business Model Design Toolkit

Word Bank & Definitions: USER Consumer An individual consumer is buying or benefiting from the offering Business A private or public organization is buying or benefiting from the offering

To refresh: an assumption is a thing that is accepted as true without any proof. Therefore we test our assumptions, and usually the most critical or make-or-break to our idea first. Once we have confidence that we can confirm or disconfirm the assumption we can move on. These assumptions typically fall into three categories: value, scale and execution.

confirmed

disconfirmed

Third-Party A third-party is buying or benefiting from the offering Shared/Co-Pay A group of buyers or beneficiaries share costs

CHANNELS Online Search/Paid Ads User searches for a keyword and comes across your offering’s web page Social Media User comes across your offering organically or from a post you sponsor Word-of-mouth User hears about offering from an interaction with trusted contacts Direct salesforce User interacts with someone who represents your brand 13

Templates

Business Model Design Toolkit

Assumptions Outlining your make-or-break assumptions should happen way before any business model test is launched.

Assumption

Value Test Customers want it Customers will pay for it Partners want it

Retail/E-commerce User comes across your offering while shopping online or in-store Franchisee/Re-seller User comes across your offering while shopping online or in-store from a third-party vendor

You define core features of your offering, key user benefits (use value prop on previous page)

ON-RAMP Free Consultation User connects with a product representative to learn about the product’s value to them

Product Preview User receives a virtual walkthrough of the product, it’s features and how to maximize value Money-Back Guarantee User buys the offering and has the option to return it for a full refund Free Trial User tries the offering at no expense to them for a limited amount of time Referral Bonus User receives discount for referring/being referred

Who is your target user? Execution Test We can produce the experience technically We can operate the business as it grows

Are they paying for it? Do they get value from your service/ product (the beneficiary)? What are their pain points that your offering seeks to address?

USER

Scale Test Addressable market is big enough We can acquire customers affordability Revenues exceed costs at scale We can protect our IP

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lifestyle is

ADJECTIVE

, she is always

COMMON ACTIVITY THAT YOUR OFFERING ADDRESSES

having to

TARGET USER PAIN POINTS

. When she

.

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3 2

Templates

Business Model Design Toolkit

How will potential users learn about the offering? One day, when she’s trying to , she learns about

from

attracted to

RATE

option to

every time she uses it, but also has the .

OTHER VALUE-EXCHANGE MODELS

… ONE-TIME

because it

User pays for the offering 1 time and gets unlimited access

, which will improve her life by

Financing: user pays a rate on a fixed cadence, with interest

e.g. Buying a car .

KEY CUSTOMER BENEFITS

To see if

e.g. Parking Meter

. She’s

CHANNELS

YOUR OFFERING

CORE FEATURES

User pays everytime they use the offering

...to pay

COMMON ACTIVITY YOUR OFFERING ADDRESSES YOUR OFFERING

… PAY-PER-USE

...to buy it for is right for her, she

YOUR OFFERING

explores it more deeply by

to

PRICE

, but she also has the option

FINANCING OPTIONS/OTHER VALUE-EXCHANGE MODELS

.

.

ON-RAMP

… FREE-ACCESS Freemium: User accesses a basic version of the offering for free and can pay for add-on services/tools

User doesn’t pay for offering, but they create revenue through engagement

How will your user acquire your offering?

e.g. Social media, Google Search

e.g. Spotify, Zoom, Conferencing

...to use it for free and creates value by She finds value in acquire it by going to

YOUR OFFERING CHANNEL

and decides to and choosing...

Choose a model for how your user exchanges value for your offering:

.

AD/OTHER REVENUE FROM USER DATA/ENGAGEMENT

...to use it for free, with the option to pay for .

ADDITIONAL FEATURES/FUNCTIONALITY

… SUBSCRIPTION User pays a rate for offering on a fixed cadence

How will you keep users coming back for more?

e.g. Netflix, Stitch Fix ...to subscribe and pay

PRICE

on a

FREQUENCY

basis, but also has the option to

OTHER SUBSCRIPTION PLANS/OTHER VALUE-EXCHANGE MODELS

10

.

She continues to engage with

CHANNELS/VALUE EXCHANGE

YOUR OFFERING

by

.

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